House Vote, Some PMI Results, and Divergent Interest Rate Moves

March 24, 2017

It’s deja vu this Friday. The repeal and replace vote in the U.S. House of Representatives to replace the ACA with the Republican Insurance Policy, which was scheduled for Thursday, is to happen instead today. President Trump wants no more negotiations on this. The result looms as a huge test of the new president’s ability to achieve sweeping policy changes.

European preliminary purchasing manager survey results in March surpassed expectations, indicating accelerating growth at the end of the first quarter but also intensifying inflation pressure. The composite¬†euro area PMI rose 0.7 points to 56.7, a 71-month high. Both service sector activity and manufacturing were at 71-month highs as well. Germany’s composite PMI advanced 0.9 points to a 70-month high of 57.0, and France’s composite PMI gained 1.7 points to a 70-month high as well.

The Bank of Russia surprised analysts with a 25-basis point interest rate cut to 9.75%, citing faster-than-expected declines in inflation and expected inflation and ruble appreciation.

Sri Lanka’s central bank, in contrast, raised its key deposit and lending rates by 25 basis points each to 7.25% and 8.75% in a proactive effort to counter accelerating inflation.

Dallas Fed President Kaplan is the latest official to publicly endorse a gradual rise in the federal funds rate.

The dollar is unchanged from last night against the yen, yuan and loonie. It’s risen 0.3% against sterling, 0.2% versus the kiwi and 0.1% relative to the peso and Aussie dollar but also lost 0.2% versus the euro and 0.1% against the Swiss franc.

Ten-year sovereign debt yields settled back two basis point in German and the U.K., 3 bps in France and 4 bps in Spain.

Japan’s Nikkei closed up 0.9%. Other stock markets around the Pacific Basin rose 0.8% in Australia, 0.6% in China, 0.5% in Singapore and 0.3% in India. In Europe despite the better-than-anticipated euro zone PMI scores, equities are down 0.4% in France and Greece, 0.3% in Italy, and 0.2% in Germany, Switzerland and Spain.

There’s going to be a meeting this weekend in Kuwait by officials from some OPEC members and non-OPEC producers. West Texas Intermediate crude oil recovered 0.6% to $47.97 per barrel on the possibility of a more disciplined effort to control production. Comex gold and copper are marginally softer.

Japan’s manufacturing purchasing managers index slid back 0.7 points to a 2-month low of 52.6 in March. Input price inflation is close to a 2-year high, but Kuroda made remarks that were dovish.

Japan’s index of leading economic indicators in January was revised downward to 104.9, still a 19-month high. The index of coincident economic indicators, revised to 115,1, was at a 3-month low.

South Korea consumer sentiment improved to a reading in March of 96.7 from 94.4 in February and 93.3 in January.

Revised Dutch and French GDP data for 4Q16 were released.

  • Dutch GDP grew an upwardly revised 0.6% and was 2.5% higher than in the final quarter of 2015. Dutch GDP on average expanded 2.2% in 2016.
  • French real GDP went up 0.4%, twice as much as the 3Q pace. GDP grew 1.1% in 2016.

The British Bankers Association estimates 42,613 mortgage approvals in February, 3.5% less than in January and fewest since November.

Switzerland posted a CHF 70 billion current account surplus last year and a CHF 22 billion surplus last quarter.

Spanish PPI inflation settled back to 7.3% last month from 7.6% in January, which was the highest since July 2011.

New Zealand’s NZD 3.794 billion trade deficit during the year through February was the biggest 12-month shortfall since the year to April 2009.

U.S. durable goods orders and Canadian consumer price data get released today.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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